Court Confirms that a Judgment Against a Property Owners Association Does Not Bind the Individual Lot Owners Not Parties to the Litigation

03
Sep 2014
Court Confirms that a Judgment Against a Property Owners Association Does Not Bind the Individual Lot Owners Not Parties to the Litigation

The North Carolina Court of Appeals confirmed yesterday that a decision binding a property owners’ association is not binding on the individual lot owners who were not a part of the underlying litigation.  The Court’s decision in Hedgepeth v. Parker’s Landing Property Owners Association, Inc. was the result of a second round of litigation initiated by a purchaser of property at a foreclosure sale.  Hedgepeth sought to develop the property he acquired, but was unable to do so without first obtaining a right-of-way across a neighboring subdivision.

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In the first lawsuit, filed in federal court, Hedgepeth sought a declaratory judgment that he had a right of ingress and egress to his property over Parker’s Landing Drive so that he could subdivide and develop his property.  The federal court ruled on summary judgment that Parker’s Landing Drive was not subject to an easement benefitting the Hedgepeth property.  However, the court found that Hedgepeth was entitled to an implied easement over a 25-foot right-of-way over the Parker’s Landing subdivision, but that the easement was restricted to the use necessary for the farming or cultivation of the Hedgepeth property, consistent with the use when the common title to the two tracts were severed in 1894.

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Subsequently, Hedgepeth filed a complaint against the POA and individual lot owners seeking a declaration of the rights of the parties and to enjoin the defendants from interfering with Hedgepeth’s easement.  Individual lot owners likewise filed lawsuits to enjoin Hedgepeth from constructing a roadway across the lots.  Hedgepeth filed motions to join the individual lot owners in the various lawsuits, as well as motions for summary judgment in the numerous pending lawsuits.

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The trial court consolidated the pending cases and denied Hedgepeth’s pending motions for summary judgment.  Hedgepeth appealed the denial of his motions for summary judgment.

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The Court of Appeals noted that although the denial of summary judgment is interlocutory, a motion for summary judgment based on res judicata or collateral estoppel may affect a substantial right, making such a denial immediately appealable.  The Court found that the issue litigated before the federal court was the existence and location of any easements across the Parker’s Landing property, and consequently, the federal court’s decision as it related to the 25-foot easement constituted res judicata between Hedgepeth and the POA.  Notably, however, the Court concluded that the federal court’s decision was only binding on the POA, not individual lot owners, for the purposes of res judicata and collateral estoppel.  The Court further noted that owners of property affected by an easement must be made parties to the litigation to be bound by a judicial decision.